Liam Fox: The Foreign Secretary has already set out the circumstances in which—[ Interruption. ] I have no intention of commenting further on special forces. I am glad that the hon. Gentleman has joined me in thanking those who took part in that work. I visited HMS Cumberland in Malta at the weekend to thank the crew for the tremendous work they did on behalf of the Government and the House of Commons. The fact that we were able to take 926 citizens, of whom only 286 were British, shows just how far we were ahead of the curve and doing our utmost to help those of other nations as well.

Nick Harvey: The strategic defence and security review said that RAF Kinloss and two other RAF bases would close. We are in the middle of a comprehensive basing study, covering the needs not only of the RAF but of the Army in the future. It is a complex piece of work. As soon as we are able to balance all those competing requirements, we will make a full statement to the House.
	Topical Questions

Daniel Poulter: I am sure that the Minister will agree that while our British forces are in Afghanistan, it is important for them to contribute to the development of a strong humanitarian legacy in terms of basic health care, education and clean drinking water for the people of Afghanistan. What steps is his Department taking, in conjunction with the Department for International Development, to help to secure that legacy?

Liam Fox: The coalition agreement made it very clear that the Liberal Democrats within the coalition would be free to advocate alternatives to the replacement programme. The overall Government policy remains the replacement of the Trident programme however, and, as I said earlier today, the best solution for the United Kingdom is a submarine-based, continuously-at-sea, minimum credible nuclear deterrent that protects the UK while contributing to overall reductions in international nuclear arsenals.

Edward Miliband: May I start by associating myself with the Prime Minister’s remarks about the Japanese earthquake and tsunami? The tragedy that has hit that country is of almost unimaginable horror and scale, as all of us will have felt after seeing the pictures on our television screens over
	the weekend. We fully support the Government in their efforts to help the Government of Japan in their hour of need and, indeed, to help Japan’s people.
	This is clearly an anxious time for the friends and family of UK nationals and I thank the Prime Minister for what he said about our consular activity. I am sure that consular staff will be working around the clock to deal with the inquiries that they receive. Let me also associate myself with the Prime Minister’s remarks about the work of British search and rescue teams.
	On nuclear power, we should clearly see if there are lessons to be learned, but should avoid a rush to judgment given that we have a good safety record in this country. It is important not to lose sight of that.
	Turning to the European Council, I want to focus on three issues: the military options available to the international community regarding Libya, the wider response to the Libyan crisis and the need to re-energise the middle east peace process. Let me take each issue in turn. First, I welcome the clear and unequivocal statement in the Council declaration that the Libyan regime should relinquish power immediately. As the Prime Minister made clear in his statement, the situation in Libya is grave and pressing. I said, when the Prime Minister first publicly floated the idea of a no-fly zone two weeks ago, that we welcomed the possibility. It is disappointing that Friday’s communiqué did not mention it, although it is, as he has said, encouraging that the Arab League has expressed support for it. In view of the gravity and urgency of the situation, and to win greater support for the idea, it seems to us that the priority must be to translate the no-fly zone phrase into a practical plan. To that end, may I ask what progress has been made since he asked the Ministry of Defence to draw up such a plan two weeks ago? Specifically, was such a plan presented by the UK at the NATO Defence Ministers meeting last Thursday or by him at the European Council? On the European Council, may I ask whether the ambivalence among our EU partners is based on opposition to a no-fly zone in principle or is because of practical doubts about the workability of such a proposal? Can he give us a clearer picture, because that is necessary to win broader support, of what he believes the no-fly zone would involve and, furthermore, whether it is contingent on the US Government’s participation, given that some parts of the Administration have expressed reservations about the idea?
	On timing, I note that the Prime Minister repeated his statement of last week that the UK is now working on a new Security Council resolution, which I welcome. Given the urgency of the situation, to which he rightly drew attention, what is his best judgment about when such a resolution will be tabled? Above all, may I emphasise to him the importance of matching what is said in public with the diplomatic spadework needed to win international support for a practical and legal plan?
	I have one more question on the military options that are available. Given the position expressed by the former Foreign Secretary, the right hon. and learned Member for Kensington (Sir Malcolm Rifkind), this morning on providing arms to some of the rebels against Colonel Gaddafi, what is the Government’s position on the legality and wisdom of that idea?
	Secondly, let me turn to the other actions that we can take. I welcome what the Prime Minister said about asset freezes and sanctions. May I make a further
	suggestion? To maximise pressure on the regime, have the Government made any formal communication to the International Criminal Court to impress on Libyan leaders and commanders the importance of individual accountability for the commissioning and carrying out of crimes against humanity? If he has not done so—and I believe that it is open to individual countries to do this—may I suggest that he looks into the UK Government doing so?
	On the humanitarian crisis, to which the Prime Minister referred, may I ask him whether the Department for International Development is planning to provide additional support to other multilateral organisations such as the World Food Programme and the United Nations High Commissioner for Refugees?
	Thirdly and finally, may I discuss briefly the middle east peace process? He and I both had the chance last week to meet President Abbas during his visit to London. May I reiterate to the Prime Minister something with which I know he agrees—the central importance of not losing sight of that issue as other, more immediate crises face us. Will the Prime Minister therefore tell us what discussions took place at the European Council about how the EU can help to get the peace process back on track? In particular, what representations have been made to the United States following its recent veto of the UN resolution on settlements?
	Finally, let me tell the Prime Minister that he and I are united in the view that this must be a moment when the European Union and the international community show they are more than the sum of their parts, whether it is on Libya specifically, north Africa or the middle east peace process. I hope that he and other leaders will do all they can over the coming days and weeks to put in the hard work and diplomacy that can make that happen.

David Winnick: The United Nations Security Council is the right way to pursue this matter. Was there any explanation at the European Council meeting of the bombs, the torpedoes, the rockets and the missiles that have been sold to the Libyan regime by France, Italy and Germany—that is apart from what we have been selling up until the past few weeks? What on earth did the Governments believe those arms were going to be used against?

Bernard Jenkin: I really think that my right hon. Friend deserves congratulations on the fact that a fortnight ago he was virtually a lone voice in floating the idea of a no-fly zone, and now he has the support of the Arab League and France. What exactly went on at the European Council? Who was Baroness Ashton speaking for? What mandate does she have to give her opinions? Should she not serve the member states of the European Union rather than pretending to lead them?

David Cameron: First, I thank my hon. Friend for his kind remarks, and the temptation to be pulled down a particular path about Baroness Ashton, who I think does a good job. The point that I would make is this: what happened on Friday, I think, is that there was a rogue briefing by one of her spokespeople that she was extremely embarrassed about and, to be fair to her, did everything she possibly could to try to put right. But as the old saying goes, a lie is halfway round the world before the truth has got its boots on.

David Cameron: There is now an arms embargo that should be policed. As many hon. Members will know, sometimes the problem with UN resolutions is that we pass the resolution but we do not necessarily put in place the machinery to follow it up properly. There is more that can be done through the UN on mercenaries, but there is also more that can be done on a bilateral basis whereby countries like Britain, and perhaps particularly France, because of its relations with some of these countries, can make it absolutely clear how unacceptable it is to supply mercenaries. The message should go out to all those thinking about it that the world is watching, the International Criminal Court is watching, and that if you take part in war crimes, wherever you are, you can still be caught and punished.

David Cameron: Of course we have to show caution and forethought and we have to think through all the consequences of our action. As I have said, however, I think the consequences of inaction are going to be worse than taking the sort of steps that I have spoken about. Of course we must learn the lessons from other conflicts, but there is a real difference here: the Arab League, the Gulf Co-operation Council and the Libyan opposition are all saying, “Please will you help us in this one particular way?”. Turning the Iraq example on its head, if we turned round and said, “No, there is no question of this at all”, opinion in the Arab world might well be, “You look after yourselves when it is about your perceived security, but when it is our future and our democracy, where are you when we need you?”

Jeremy Corbyn: On a point of order, Mr Speaker. During Defence questions, the Secretary of State outlined the amount of money spent on Trident preparations. In a debate in Westminster Hall a couple of weeks ago, a Minister outlined the amount spent and said that it was custom and practice to do so. I want to know how I can find out under what authority that money is spent when all the Ministers seem to be incapable of identifying a budget head that would demonstrate that they are lawfully allowed to spend a certain amount on preparations for building a new nuclear submarine.

Stewart Hosie: No, it is not, and if the hon. Lady looks at later amendments she will find that an entire series of them is related to the commencement powers, precisely to ensure that the right things are done at the right time, with the agreement of everybody involved. We will consider that, and I hope the hon. Lady is still present in the Chamber when we do so.
	Two specific corporation tax issues relate directly to the Bill’s provisions. Existing provisions allow assigned revenue from a share of income tax—one large tax and a chunk from that, and lots of small measures. It would be much better if there was a balanced basket of taxes,
	so there was not an over-dependence on, and therefore a potential volatility from, having such a large amount of assigned revenue from a single tax. It would also be preferable if there was a personal tax and business taxes, so that they could be offset. It would also, of course, be preferable to remove the perverse disincentive under the Bill in respect of any future Scottish Government reducing income tax. Let us imagine that a Government decided that, for whatever reason, that such a measure might be sensible to stimulate growth, but the Scottish Government took the hit in reduced revenue yield from income tax while the UK Government took the benefit of increased corporation tax. The effect of having only a large personal tax, and not a significant business tax, is that it unfairly and unnecessarily removes the number of economic or fiscal levers open to the Scottish Government. That is an important point.

Brian H Donohoe: I have campaigned on this issue for some time, as has the aviation group within the House. We have asked for this tax to be looked at because it is just ridiculous, given what is happening in Europe. If the tax were to have been devolved, the Government’s position was that it should be devolved and there was to be a variant—one would presume that that is why the hon. Gentleman is asking for the tax—where would the money come from for any downward variation?

Stewart Hosie: I am intrigued by the hon. Lady’s introductory remarks. They bear no relation to the amendments, but that should not surprise us.
	There is indeed a very serious matter at stake. We have tabled an amendment to devolve the aggregates levy, which is a recommendation by the Select Committee
	on Scottish Affairs and by Calman, and will make the Bill better. If we can divide the House, will Labour join us?

Ann McKechin: The hon. Gentleman did not refer to any of that evidence in support of his amendments. He also did not refer—why would he; it would be too embarrassing—to the purpose of the national conversation, which the Scottish Government instructed, and the many position papers that civil servants were struggling to produce and make sense of, at considerable cost to the Scottish taxpayer at a time when the resources could have been much better used.
	The hon. Gentleman provided us with no independent evidence or statistics showing how, if fuel duty is devolved to the Scottish Parliament, it will result in a benefit to the taxpayer. The matter is urgent and we require immediate action. That is why we have called on the Chancellor to reverse the Tory-led Government’s VAT rise immediately and to suspend the fuel duty rise due in April. That would provide immediate relief to taxpayers and to drivers right across Scotland. That is the best way we can help people with motoring costs now.
	The Calman Commission recommended that the power on aggregates be devolved. We support that principle. The Government have indicated their intention to devolve it, presumably on the assumption that the court case will be decided in the Government’s favour. I would welcome the Minister’s comments when he replies, to confirm that that is still the Government’s intention.
	It would be helpful to the Committee to understand what progress has been made on the Government’s review of air passenger duty, when they think that review will be complete, when they expect to be able to devolve the tax and whether they still wish to maintain the scheduled date of 2015.
	New clause 17 relates to corporation tax, which the Scottish Government have been talking about for a considerable time. The pertinent questions that we all must consider carefully are what exactly does the SNP wish to do with the proposed power, where does it see the revenue gain coming from, and on what evidence is that based. Do we follow the Irish example of having a super-low rate, or do we follow the view of the SNP in Edinburgh and have retail business levy proposals, which were very badly thought out and arbitrarily proposed without consultation? Are we a high-tax or low-tax nation? Do we believe in high-quality, good value public services, or do we want to have a lower public expenditure base?
	Some people believe that Ireland is an exact example for Scotland, but I argue that it certainly is not. Sadly, we no longer have the arc of prosperity argument from
	the Scottish Government. Nevertheless, it is important to note that when Ireland introduced its policy it was in a very weak economic position and the loss of revenue was relatively small, but that would not be the case for Scotland, which has a well-developed economy. If corporation tax is devolved, EU state rules require that the devolved Administration must not be protected from the revenue consequences of their decision.
	It is clear that cutting corporation tax rates will cut revenue, at a minimum for some years, as suggested in the Exchequer evidence to the Holyrood Committee:
	“A 10% cut in corporation tax in Scotland might cost about £600 million per year for an indeterminate period.”
	The hon. Member for Dundee East (Stewart Hosie) has not specified what figure his party proposes for corporation tax, what loss to the Exchequer will result and when his party believes it will recoup the loss. No one in Scotland will want us to vote on the issue until we have the pertinent answers.
	The CBI and other business organisations have firmly stated that they are against differential rates within the UK. Many of the experts who gave evidence to the Committee in Holyrood noted that it would create economic distortions—the brass-plating of booking profits through Scotland by manipulating transfer pricing. I refer Members to paragraph 54 of the Holyrood Committee’s report, which states:
	“The Committee does not believe that Scotland should seek to maximise its tax income by becoming a tax haven for companies operating elsewhere in the UK.”
	I entirely agree with that approach.
	Some evidence was given regarding the example of Switzerland, which has a highly federalised and separate tax system in its various cantons, but the Swiss example points out that that would tend to lead to lower public expenditure. Is this what the SNP proposes for Scotland? The people of Scotland need to know whether the answer is yes or no. Paragraph 494 of the Committee’s report states that Professor Anton Muscatelli noted that the Swiss example is one where there has been
	“a shift from corporate taxation to personal income taxation.”
	He also pointed out that that is a volatile tax.
	Hon. Members will be aware of that volatility, which occurred after the 2007 fiscal crisis. The major payers of corporation tax in this country are our banks and financial institutions. They took a huge hit in 2007-08 and onwards. The cost for the Scottish public amounted to £10,000 for every man, women and child in Scotland. Where would those funds have come from if the Scottish Government had had to bear the entire cost? Is the SNP willing to allow Scottish public finances to take that level of risk? Is it saying that it wishes to see a cut in taxes on banks? Yes or no? We have had no answer to that either. Labour has argued that the banks are not paying an appropriate share towards deficit reduction in this country and has again called today for the bank levy to be increased in the Budget.
	In paragraph 505 of the Holyrood report, Professor Iain McLean, whom the hon. Member for Dundee East quoted, points out that the Northern Ireland experience between 1920 and 1972, when corporation tax was devolved, was marked by widespread tax avoidance.
	Many similar questions need to be asked, but at the end of the day the SNP has failed to say what it wants to do with the tax, what kind of tax regime it wants in
	Scotland and what it proposes in relation to bank taxes: is it for lower or higher taxes? Today, there has been the sound of deafening silence.
	I have a number of questions to ask the Government about clause 24 itself. They have still to respond in detail to the Holyrood Committee’s report, and given the timing of next week’s Budget I am sure the Exchequer Secretary has many other things in his basket. Does he not agree that, given the considerable number of points that the report raises, we can anticipate at least some substantive amendments from the Government? If so, does he agree that, to ensure the maximum amount of democratic scrutiny, they should be tabled prior to Report, not simply left until the Bill arrives in the House of Lords?
	Last week, the Government announced a consultation on the so-called Cadder clauses, which, as the Exchequer Secretary is aware, were not part of the original Calman commission. That consultation will continue until mid-May. Does he not agree again that it would be better to postpone Report until it is complete in order to allow us properly to scrutinise in the Commons this important legislative and constitutional reform?

Russell Brown: I did not intend to speak on the amendments tabled by the hon. Member for Dundee East (Stewart Hosie), but I feel that some issues need to be addressed, and I want to put to him one or two questions about fuel duty that I hope he will answer when he responds to the debate.
	I am sure that no one in the Chamber does not recognise how difficult this issue has become for motorists in any part of the UK—particularly, I recognise, for those in the northern and western isles. However, when I look at the whole concept of devolving this additional tax on fuel duty, I wonder, in all honesty, whether the proposal would have been before us if fuel prices at the pumps were not so expensive. The hon. Gentleman has not given the slightest indication how this additional income would be used. More importantly, does he have even a ballpark figure on how much would be raised in terms of additional taxation going to the Scottish Parliament? In a previous debate, he and I discussed the fuel duty stabiliser, of which he has been a great advocate. As I pointed out to him, his advocacy has not always been consistent, as there was one year when the SNP dropped the proposal. If he had his way and managed to get the amendment through, and the fuel duty charge became a devolved issue, would he totally abandon the whole concept of a fuel duty stabiliser?
	I am not in favour of a fuel duty stabiliser, as I have made clear to constituents who have corresponded with me over recent weeks. I need only point to the campaign run by FairFuelUK, which has not given the slightest indication of what it thinks is a reasonable price for fuel and a reasonable level of duty. The wider public might think that this is a tremendous idea, but I warn the Committee, as I have warned my constituents, to be very careful. With the current fluctuating price of fuel—crude oil—and the way that the marketplace is at the moment, if a fuel duty stabiliser were suddenly introduced,
	we would end up with fuel pegged at a price that is unsustainable. People filling up their cars are already baulking at the whole concept of what they have to pay, and it is completely wrong to peg pump prices at a level that is unsustainable.
	I will also briefly mention the rural fuel derogation, about which the hon. Member for Na h-Eileanan an Iar (Mr MacNeil), who is not with us, might have some idea. I hope that the hon. Member for Dundee East will indicate the average mileage of someone living in the northern or the western isles. I recognise how painful it must be for people living in those localities to pay 10p or 15p per litre more than people on the mainland. However, the pain that such people suffer if they do 5,000 or 8,000 miles a year is comparable to that suffered by people in areas such as mine who have to do 15,000 or 20,000 miles a year, or more. Fuel prices are only one element of motoring costs. People in some places pay an astronomical price because of the miles that they have to cover. On an annual basis, people on the islands might not pay more; they might even pay less if they have a low mileage.

Fiona O'Donnell: This may not be something that the hon. Gentleman is used to hearing, but I am going to tell him, “Not yet”. As my hon. Friend the Member for Glasgow North said, until we have a ruling and clarification, there is a risk to the Scottish Government. That does not mean withholding those powers for ever, but is about protecting Scotland and looking out for its interests.
	On corporation tax, the hon. Member for Dundee East spoke about how he was in favour of tax competition. It appears that the only trend available to the Scottish National party is a downward one—a race to the bottom. We must therefore ask how they will make up the shortfall in revenue. My hon. Friend the Member for Glasgow North spoke of an £600 million annual loss to the Scottish economy for an indeterminate period. What will the SNP cut to make up for that? Will it cut apprenticeships, health care or education? That question has not been answered.
	We are also rather short on consultation, which is unsurprising given the SNP’s absence from the consultative process throughout the history of devolution. I will be interested to hear the hon. Member for Dundee East—that
	is not an invitation to intervene—address the question of exactly whom the SNP consulted in drawing up its proposals and how that took place. Consultation has been the Labour party’s approach, but I suspect that it has not been the SNP approach.
	The Committee today has a clear choice on whether to adopt a set of proposals that offer progress and development for the Scottish Parliament and Government. I very much hope that after 5 May, the Scottish Government will take advantage of all the levers at their disposal that encourage and foster economic growth in Scotland. At no point in the Bill’s progress or the Calman Commission has the case been made to advance the cause of full fiscal autonomy for Scotland. I respect the SNP position, and I like them to be up front and honest about it. The SNP wants independence—that is their one policy aim, even if it seemed not to talk about it quite so much over the weekend. The SNP would expose Scotland to those risks, whereas the Bill and the Calman Commission offer the opportunity for Scotland to have a mature Parliament that takes responsibility at the same time as spending money, and that will answer many of the criticisms in the e-mail from Mr Haig to the hon. Member for Milton Keynes South (Iain Stewart).
	If the amendment is pressed to a Division, I hope the Committee makes the right decision and recognises the achievements of the Bill, and that it rejects the SNP’s minority report and fantastical proposals.

Stewart Hosie: I would like it cut over a number of years, taking the benefit of the announcement effect and taking advantage of the experience of other countries, where, with modest changes on a downward spiral in corporation tax, the business tax yield has increased. That is very sensible and is, I think, what the current Government have in mind.
	Let me turn briefly to what the Minister said. He said that the proposal would provide around one third of Scotland’s budget. That is similar to the figure of 35% proposed by the Calman commission, but that included all the revenue proposed by Calman, much of which is
	not in the Scotland Bill. That figure was also calculated on a baseline that excluded capital expenditure from the Scottish budget. The Minister will find that the actual percentage share is considerably lower. He said that the Government would never seek to devolve taxes on a whim. Let me assure him that we would certainly not want to do that either. We would want to devolve taxes only to provide balance and a basket of taxes to mitigate against any volatility, which may well arise when the bulk of our assigned revenue comes from a single, personal tax.
	I am not convinced by many of the arguments I have heard. There is a very strong case indeed for trying to push forward with the Calman proposals, particularly on the aggregates levy, so I intend to divide the Committee on amendment 58, but for now I beg to ask leave to withdraw the amendment.
	Amendment, by leave, withdrawn.
	Amendment proposed: 58, page16,line17,at end insert—
	‘(c) Chapter 5 provides for an Order in Council to specify, as an additional devolved tax, a tax charged on quarrying or mining,’.—(Stewart  Hosie .)

Question put, That the amendment be made.
	The Committee divided: Ayes 8, Noes 292.

Ann McKechin: I beg to move amendment 68, in clause26,page18,line11,after ‘may’, insert
	‘after consultation with such persons as Scottish Ministers consider appropriate’.

Charles Walker: With this it will be convenient to discuss the following:
	Amendment 69,page20,line5,after ‘may’, insert
	‘after consultation with (a) Scottish Ministers, (b) the Scottish Parliament and (c) such persons as it considers appropriate’.
	Amendment 70, in clause26,page20,line21,leave out subsection (4).
	Government amendments 61 and 62
	Amendment 43,page20,line35,after ‘Treasury’, insert
	‘, with the consent of the Scottish Parliament,’.
	Amendment 44,line38,at end insert—
	‘(6A) For the purposes of subsections (4) and (5)—
	(a) reference to the consent of the Scottish Parliament means consent by resolution, and
	(b) standing orders must provide that only a member of the Scottish Government may move a motion for such a resolution.’.
	Government amendment 63
	Amendment 47, clause29,page23,line12,after ‘Treasury’, insert
	‘, with the consent of the Scottish Parliament,’.
	Amendment 48, line28,at end add—
	‘(7) For the purposes of subsection (4)—
	(a) reference to the consent of the Scottish Parliament means consent by resolution, and
	(b) standing orders must provide that only a member of the Scottish Government may move a motion for such a resolution.’.
	Government amendment 64
	Amendment 49, clause31,page24,line8,after ‘Treasury’, insert
	‘, with the consent of the Scottish Parliament,’.
	Amendment 50, line8,at end add—
	‘(5) For the purposes of subsection (4)—
	(a) reference to the consent of the Scottish Parliament means consent by resolution, and
	(b) standing orders must provide that only a member of the Scottish Government may move a motion for such a resolution.’.
	Government amendments 65 and 66
	Government new clause 18—Orders—
	‘Any power to make an order conferred by this Act is exercisable by statutory instrument.’.

Ann McKechin: I am speaking to amendments 68, 69 and 70 and I wish to put it on record that the wording of those amendments was suggested by the Law Society of Scotland. I shall speak to the amendments first and then to the clause stand part—with your agreement, Mr Walker. I have a substantial number of questions to put to the Government about the implementation of this important clause.
	On amendment 68, new section 80C empowers the Scottish Parliament to set by resolution the Scottish rate of income tax. This is an important power that is required to be exercised in accordance with the principles set out by the consultative steering group report published by the Scottish Office in 1999. These principles include accountability, openness and accessibility with a view to making possible “a participative approach” to “policy and legislation”. Accordingly, Scottish Ministers should, we believe, be required to consult those considered to be appropriate when proposing the resolution for the Scottish rate—much in line with existing practice of the Treasury here.
	On amendment 69, new section 80G enables the Treasury to disapply or modify section 6 of the Income Tax Act 2007. This could involve issues such as gift aid relief or pensions relief. The order would be introduced in the UK Parliament and debated and passed or rejected in the UK Parliament. However, it could substantially affect the Scottish rate and Scottish taxpayers, as well as
	Scottish charities and pension funds, so we believe that Scottish Ministers and the Scottish Parliament should be specifically consulted prior to any amendment of these reliefs.
	Finally, amendment 70 takes out subsection (4). We have concerns about the provision. Section 80G(4) provides that an order made under that section
	“may, to the extent that HM Treasury consider it to be appropriate, take effect retrospectively”.
	We believe that HM Treasury should, at a minimum, consult Scottish Ministers and the Scottish Parliament if retrospectivity is required. The Minister will not be surprised to hear me say that I think all Governments should avoid retrospective legislation whenever possible—unless there is a proven and specified need. We think that the case for retrospective application in this instance has not yet been made out.
	The amendment is designed to probe this issue. The Scotland Office has indicated that the power would be used to make tax reliefs applicable retrospectively, but I suggest that this could be done either by regulation or statutory instrument. The clause enables a charging order to be made by the Treasury, which is a matter of concern to us. Any retrospective action by the Treasury could—I stress could—have a detrimental impact on individual taxpayers and on the Scottish parliamentary budget. I hope that when the Minister responds he will provide some assurance about the circumstances in which and when the Government intend to use this power. I hope he will confirm how limited the power will be when it comes to its practical exercise.
	Paragraph 673 of the report by the Holyrood Committee asked a number of questions about residence. The question of residence is one about which most of the tax experts we consulted expressed some concern. I understand that there is no statutory definition of a UK resident taxpayer. This legislation, however, attempts to define by statute a Scottish resident taxpayer. Given that that is, in a purely technical sense, a subset of a UK resident taxpayer, I think the Minister would accept that it is unusual to have a fixed statutory definition within a floating definition. I would like to question him a bit further about how this will work in practice and what the levels of risk are in respect of the current application of the law.
	Paragraph 673 of the Holyrood Committee report asks what “place of residence” means, as defined in clause 26, as it appears to be different from how residence is understood in other areas of tax law such as capital gains tax. Does place of residence imply ownership when juxtaposed against “main place of residence” in new section 80E(a), (b) and (c). Place of residence and main place of residence are not defined in that new section, which I fear could present problems of interpretation. I would be grateful if the Minister clarified his understanding of the interpretation in this case.
	How the tax is to be applied in practice is an important issue. The vast majority of Scottish taxpayers live the whole period of their lives in Scotland or live there for very substantial periods, and it is relatively easy to define who those people are. What about people working on board ships or on oil rigs, for example? What about members of our armed forces and what about those who are neither UK resident nor employed by non-UK employers? As I said, the Scottish taxpayer is defined by
	reference to an individual who is resident in the UK for income tax purposes. The current definition of UK residency lies in 86 pages of guidance that are the subject of frequent revision by HMRC. How, then, can the Government be confident that this definition is going to work? Do the Government agree with the Chartered Institute of Taxation that the introduction of a possible statutory residence test for the UK is now essential? Experts in, for instance, the Institute of Chartered Accountants of Scotland, the Chartered Institute of Taxation, the Federation of Small Businesses and CBI Scotland have expressed concern about the lack of a concrete definition. What are the Government doing to address those concerns expressed by professional experts? I understand that they are considering the issue. Will the Minister tell us whether they are likely to attempt to provide a better definition of a UK resident taxpayer in the Finance Bill that will follow next week’s Budget statement?
	Will the Government clarify the position of personal representatives of a deceased person? Will they count as individuals for the purpose of this definition? If so, will any income arising during the administration of an estate be treated as income subject to the Scottish rate?
	What are the Government doing to address concerns about the “close connections” test? For example, an English oil worker who lives in England but commutes to a Scottish oil rig—which, of course, is a regular occurrence—will not have a close connection, but a Scottish resident who works in England and returns to Scotland for weekends and holidays could be caught. How will the Government deal with mobile workers who may find it impossible to know where they are until a day count is carried out at the end of the tax year?
	It has been suggested that there is a high risk of perception of unfairness because the definition of “Scottish residence” is so loose that wealthy individuals can arrange their affairs in such as way as to avoid a higher rate of tax. How do the Government plan to avoid such a scenario? What mechanisms do they propose to deal with disputes about the application of the rules? Will there be a special tribunal system and a right of appeal?
	Do the Government not agree that if a non-UK resident is working in Scotland and liable to pay tax, it should be paid at the Scottish rate? The Bill currently provides for company directors, sports people and entertainers undertaking duties wholly in Scotland to pay UK income tax on income earned entirely in Scotland, but not to pay Scottish income tax. Employees will inevitably approach their employers rather than the tax office for information on their tax status. What will the Government do to support employers? I appreciate that the implementation of the Bill is a number of years away, but I think it important at this stage to give businesses and employers as much reassurance as possible about how the Government will seek to minimise the burden and bureaucracy that they may have to face as a result of the Bill.
	When the Federation of Small Businesses surveyed its members, it found that 18% of them did not use PAYE software to administer their payrolls by means of computer systems, but undertook the task manually. Is it not unhelpful of the Government to suggest that many small businesses should be forced to take on the
	burden of identifying and administering the new tax rates? What specific measures will the Government introduce to help small businesses with 10 or fewer employees to cope with the changes?
	Although there has been some publicity in Scotland about the Bill, south of the border there will be little knowledge among businesses that may employ a few staff north of it. What kind of public awareness campaign will the Government conduct to make companies aware of the proposed changes and their impact on payrolls?
	I should be grateful if the Minister told us about any of the discussions he has held with the high-level expert group about the definition of Scottish residence and the issues that have arisen as a result of those discussions, which I understand have been proceeding for some months.
	The Chartered Institute of Taxation has suggested that HMRC will need to
	“staff up properly in anticipation of a considerable extra flow of questions when the Scottish income tax goes live.”
	What are the Government doing to achieve that, given that in recent months HMRC has been closing offices across Scotland and the rest of the UK and reducing its capabilities?
	Under the Bill in its present form, no account is taken of a split year, which means that once someone is classified as a Scottish taxpayer he or she will remain one for the entire year. The opposite will apply to those living in another part of the United Kingdom. For example, if a company’s one Scottish employee moves south, the company will have to continue to have a Scottish taxpayer on the payroll even when that person is no longer a Scottish employee. What is the Government doing to address an anomaly that some may consider unfair?
	Do the Government not agree that new section 80G (1) is drafted too widely? The Chartered Institute of Taxation has described it as a “Henry VIII” provision. Do the Government not think it inappropriate to use secondary legislation to make major structural changes in primary legislation without proper oversight from the UK Parliament, and indeed the Scottish Parliament, on whose budget such measures could have a substantial impact?
	If changes such as pension deduction rules are required, should they not be effected through primary legislation, or should not the Scottish Parliament and Government at least be given the right to be formally consulted? As I said earlier, we are concerned about the potential retrospective application of orders. Do the Government not agree that individual taxpayers deserve a degree of certainty in regard to their tax affairs as the end of a tax year approaches?

Rory Stewart: Given that income tax issues such as this are addressed throughout the world when jurisdictions—for example, American states—abut each other, does the hon. Lady consider them to be reasons for fundamentally objecting to the Bill, or simply matters of minor detail that could be resolved by means of secondary legislation?

Ann McKechin: As I have made clear on Second Reading and throughout this debate, Labour fully supports the principles behind the Bill and the additional fiscal powers given to the Scottish Parliament. Before the election, the Labour Government supported the Calman commission, as we made clear in a White Paper published in the summer of 2009. I think that all these issues can be dealt with, but, as I am sure accountants and lawyers will confirm, the devil is in the detail at times. It is important for the House of Commons and, no doubt, the House of Lords to give the Bill proper scrutiny, because ultimately individual taxpayers, businesses and employers will have to live with the consequences of its implementation.

Ann McKechin: No, I can assure the hon. Gentleman that I do not want to burden the taxpayer unnecessarily with additional questions and pieces of paper and that I think the residency basis is the simplest way to deal with this issue. The problem is that we have a floating definition of what is a UK resident taxpayer, and from that we are trying to define in very exact terms what is a Scottish resident taxpayer. That is the point at which there could be challenges, and sometimes mischief in that people might try to change their declaration of where they believe they are resident.
	This situation is unlikely to arise for the vast majority of taxpayers in Scotland; most of them will be faced with a very simple exercise. Nevertheless, as I have pointed out, in other jurisdictions with devolved income tax there are ways in which people have to declare where their residence is that we currently do not have in the UK. I want the Minister to say whether the Government are aware of any potential problems, and what measures they intend to put in place to avoid them, so that the maximum level of tax that is due is collected and returned to the Scottish Government, and so that administration is kept to a minimum. All hon. Members
	will be concerned about the cost to the Exchequer, and also about the costs to individual businesses. That is why I am asking these questions, but I agree that residency is the easiest way to define who should be liable to tax.
	I also appreciate that a decision has been taken not to include interest on dividends and on savings. People will comment that that perhaps creates a degree of unfairness because some individuals get the majority of their income from those sources, but I acknowledge that there are complex and expensive practical difficulties in applying a residency test for those types of revenue, and that ultimately the benefit may not be great. We therefore understand why the Government have phrased the clauses in this way, but the devil is in the detail of defining exactly what they will mean in practice.

Iain Stewart: I support the clause, but I wish to raise a couple of specific examples just to test that the definition of a Scottish taxpayer as set out in the Bill is robust and covers all eventualities. I appreciate that the examples I am about to give are technical, and if the Minister is unable to give me a definitive response tonight, I hope he will be able to do so on Report.
	My first example is based on the situation my father was in for a number of years. It relates to proposed new section 80E(3)(c) on the definition of Scottish residence, as opposed to residence of another part of the UK. My father’s home was, and is, in Hamilton, just outside Glasgow. By any reasonable test, that is his main residence: it has been the family home for generations; my mother lives there; and it is what my father would call home. However, for a number of years he worked for the Civil Aviation Authority and although he was mainly based at Prestwick, the nature of his job required him to spend a considerable amount of time at its headquarters in London. He rented a flat in central London, where he was registered on the electoral roll for council tax, for utility payments and for all the other aspects of living in a dwelling. For a number of a tax years he spent a majority of nights in London, as opposed to spending them at the family home in Scotland. Therefore, if I have read proposed new section 80E(3)(c) correctly, he would not be deemed to be a Scottish taxpayer. I would be grateful if the Minister would confirm whether that is the case. If so, is this not an anomalous situation and will the Government re-examine what the definition of “a Scottish taxpayer” should be?
	Secondly, I wish to discuss the “Caledonian sleeper” question, which relates to proposed new section 80F(1)(a) and the number of days spent in Scotland
	“at the end of the day.”
	I do not have a detailed knowledge of the railway timetable, but let us suppose that the sleeper train left Glasgow at 10.30 pm or 10.45 pm and so was clearly in Scotland at the end of the day. If it traversed the border before midnight and so was actually in England on the stroke of midnight, would that day be counted as Scottish or English for the purposes of this calculation? I hope hon. Members will forgive me for raising this
	very detailed point, which will affect only a small number of people, as it is the job of this Committee to tease out these practical matters. I do not expect the Minister to give me a definitive reply right now, but I would be grateful if he undertakes to examine the matter and give an answer at a later stage in our proceedings.

Sheila Gilmore: It is important that we move forward on these tax powers for the Scottish Parliament. The big difference between these proposals and the ones in the Scotland Act 1998 are that these apply to all the different rates of tax. The structure being used and the fact that there will be a corresponding reduction in the block grant will deliver to the Scottish Parliament a real ability to make decisions, be accountable and test how well these things work. We wanted that in Scotland and we need it, but that is not to say that the arrangements will not have any complications and that there is no need to be clear about the answers to some of these questions. Some could be covered by regulations that are to follow, but there is always an anxiety involved in depending too much on detailed regulations, as opposed to primary legislation.
	I wish to discuss two particular areas, one of which is tax avoidance and the provisions that the Government suggest we put in place to deal with it. The last thing that we would want is for those who have the ability to arrange their tax affairs in different ways to be able to avoid paying this tax, as that would harm the Scottish economy and undermine the whole principle behind what we are trying to achieve. We need to know what provisions will be put in place to deal with tax avoidance in the future. My hon. Friend the Member for Glasgow North (Ann McKechin) mentioned the self-employed, and they are also important. It is easier for them to arrange their tax affairs in a beneficial way, whereas those of us on PAYE may not be able to do that. It is important for self-employed people to know exactly how this system will work for them, particularly if they generate earnings in different parts of the United Kingdom, as it is quite possible for such people to do.
	I also have concerns about the future interrelationship between the benefits system and the tax system. This is important because the way in which benefits are calculated for some people depends on their income after tax, which means that a variation in tax will affect benefits. The Government may be clear that systems will be in place to deal with that very quickly, but the last thing that people on benefits need is any uncertainty about their income. They need to know how any increases in their income, and therefore in their tax liability, or any decreases in their income will affect them, because at that level of income people suffer particularly badly when changes are made. If the Welfare Reform Bill proceeds in full, we will be moving towards a new benefits system at just about the same time as some of these new powers come into force, so it is important to get this right. I urge the Government to provide answers to these questions, if not now, in time for Report, so that we can be clear about how this interrelationship will work.

Fiona Bruce: May I begin by telling hon. Members how pleased I am that, after a thorough independent evaluation of the devolution settlement in Scotland,
	this Government have been quick to legislate on this issue, fulfilling a manifesto commitment of more than one party in this House? After more than a decade, the time is right to assess the implications and consequences of the devolution settlement.
	I shall now speak generally in support of the provisions of clause 26. The Calman commission review predates the economic crisis, but the need to recover the UK’s economic strength makes this issue ever more important. It is clear that economic growth will be driven by enterprise in local communities. Creating a Scottish rate of income tax will give the Scottish Government more responsibility over not only how they spend revenue, but how they raise it. That is a crucial discipline, which we hope will increase the likelihood that fiscal decisions will reflect the needs and priorities of Scotland, the Scottish economy and, most importantly, the people of Scotland. This is an opportunity for genuine fiscal accountability.
	The proposals outlined in the Bill are not entirely new, but they do mark the next stage of the devolution settlement for Scotland. The existing Scottish variable rate gives the Scottish Government the power to raise or reduce the basic level of income tax. As Donald Dewar, the original First Minister, said, the Scottish variable rate
	“asks the Scottish Parliament to face real financial choices and makes it, in a sense, more directly accountable to the people it represents.”—[Official Report, 31 July 1997; Vol. 299, c. 465.]
	However, as we have discussed tonight, the Scottish variable rate has previously been only somewhat theoretical, in that it has never been employed as a tool to influence the economic fortunes of Scotland. That raises the question of whether the new rate will be any different, but I believe that it will be. I believe that the Scottish Government can and will enjoy more financial responsibility through the radical proposals in the Bill. More importantly, the proposals have the propensity to have long-lasting positive effects in Scotland.
	To understand that, we have only to ask ourselves how our constituents—no matter which part of the UK we represent—would respond if more funding was raised and distributed locally, rather than by central Government. If that were the case, I am sure that my constituents would take an even greater interest in what their money was spent on and would be able to assess more easily whether politicians were responding to local priorities. Although the provisions relating to Scotland are based at the national level, not the local one, the same phenomenon should apply. This move should strengthen democratic accountability and bolster political engagement in Scottish communities.
	I am sure that I am not the only hon. Member recently to have received letters from constituents unhappy about the level of block grant funding given to the devolved nations and, in particular, concerned that there is a difference in funding for certain policy areas, such as university fees and prescription charges. What needs to be communicated more effectively is how the Scottish Government can prioritise their funding. In England, all funding is distributed by the UK Government but in Scotland, the UK Government pay for national—that is, UK-wide—public services, such as defence and industry, and the block grant funding is distributed by the Scottish Government and pays for devolved powers: education, various aspects of health policy and so on. As a result,
	although decisions on funding in England must involve national, regional and local priorities, the Scottish Government can spend their block grant funding on regional and local issues only.
	The income tax provisions in the Bill will mean that the procedure of setting the Scottish Government’s budget is more responsive to the wishes of the Scottish electorate. That will increase the financial accountability of the Scottish Parliament and relieve the Scottish Government’s reliance on the block grant—a healthy development and one that many of my constituents will welcome.

Ian Murray: I am grateful for my hon. Friend’s intervention, which highlights the fact that the Government’s agenda for growth is about growth in the small and medium-sized enterprise sector, and making sure that small businesses in particular can contribute a significant amount to the private sector to take up the slack caused by the job cuts in the shrinking public sector. However, the complexity of the legislation we are examining is detrimental to the many small business owners who will be concerned about the complex process they will have to go through to make sure that they employ people in accordance with the right piece of income tax legislation. Many issues have been raised about travel—I do not call the train the Caledonian sleeper; I call it the Caledonian keep-you-awake, as I have yet to sleep on it—and I hope that the legislation does not include provisions on where someone falls asleep, otherwise my own tax affairs could be rather complex.
	We must consider the issue of close connection. People may work in a different part of the UK, but it is not necessarily the place that they call home. Any Scottish MP who has regularly done the trip from Scotland to London will recognises many faces on their train or flight as people who work in London Monday to Thursday. They leave Scotland on Sunday night, and return on Thursday evening or Friday morning to their family. They would not regard themselves as English income taxpayers. They would very much regard themselves as being resident in Scotland. It is where they call home, but, as we have heard from the hon. Member for Milton Keynes South, it would not necessarily be classified as their place of residence for the payment of income tax.

David Gauke: We have had a lengthy and thorough debate. First, I intend to address the amendments and then set out in a little more detail the various tests on what constitutes a Scottish taxpayer. Finally, I hope to pick up the points that have been made in the debate and try to answer as many technical questions as possible. Whether I will be able to find the solution to the question of whether Mr Stewart senior is a Scottish taxpayer remains to be seen, but I will do my best.
	Amendment 68 would require the Scottish Parliament to consult such persons as Scottish Ministers consider appropriate before setting the Scottish rate. I believe
	that that is inappropriate, as it interferes with the accountability of the Scottish Parliament to the people of Scotland. It should not be for the UK Parliament to tell the Scottish Parliament or Scottish Ministers how they should go about setting the rate of tax. It is for them to decide and ultimately to be accountable for that decision to the Scottish people through the ballot box. There is nothing to stop the Scottish Parliament in its Standing Orders including a requirement to consult or take evidence on setting the rate if it wishes to do so. Rule 6.6 of the Standing Orders of the Scottish Parliament sets the remit of its Finance Committee, which is required to consider and report on, among other things,
	“proposals for the making of a tax-varying resolution”.
	It will be for the Scottish Parliament to decide whether a similar provision should be made in relation to any proposal to set the Scottish rate of income tax. That is a matter for the Scottish Parliament—it is not something that we should prescribe in Westminster.
	Amendment 69 requires the Treasury formally to consult Scottish Ministers, the Scottish Parliament and other persons before it uses its powers to disapply or modify the application of the Scottish rate of income tax. It may help if I describe the purpose of this power. We plan to use it to set some of the detailed rules on the operation of the Scottish rate of income tax, because any changes have to operate within the UK income tax framework, which is a reserved matter. The Scottish Parliament has given its consent to the Bill through the legislative consent motion, which includes that power and the way in which it will operate. It was not raised as a concern by the Scottish Bill Committee in its extensive scrutiny of the measure.
	Having said that, I can confirm that HMRC will work closely with all parties concerned, and it has set up three technical groups that include representatives of business and of individual taxpayers. The Scottish Government participates in all those groups, which cover in particular how reliefs for charitable contributions and pensions will be treated. The Government will publish draft legislation in advance, giving all parties an opportunity to comment. That is very much in line with our approach outlined in “Tax policy making: a new approach”, which was published at the time of the June Budget. Tax policy making has been criticised as piecemeal and reactive. I want a new approach, with consultation on policy design and scrutiny of draft legislative proposals as its cornerstone.
	I accept the motivation behind the amendment, but I hope that the hon. Member for Glasgow North (Ann McKechin) agrees that this is something we are very much doing already, so the amendment is unnecessary. Proposed new section 80G of the Scotland Act 1998 provides the Treasury with supplementary powers to allow modifications to be made at a later date. It allows, for example, certain types of income or relief to be included or excluded from the Scottish rate to provide the flexibility to be able to respond to stakeholder input and the changing environment.
	Subsection (4) of new section 80G gives the Treasury a limited power to make any changes retrospective to the beginning of the tax year. The timing of the Budget cycle is such that many Finance Bills contain proposals that come into effect before Royal Assent. I hesitate to bring back painful memories for the official Opposition,
	but hon. Members might recall that the previous Government introduced a clause at Report stage of the Finance Bill 2008, increasing the personal allowance by £600 in 2008-09 in response to pressure over the abolition of the 10p rate of income tax. As is common, Royal Assent did not occur until the summer of that year—until 21 July 2008 to be precise—but that clause took effect from the start of the tax year. A more technical example is section 60 of the Finance Act 2006, which I imagine you recall well, Ms Primarolo. That redefined the income tax exemption for employer-provided mobile telephones, and removed the ability of the family or household of the employee to use such a phone tax free. The clause took effect for the tax year 2006-07, but did not receive Royal Assent until 19 July 2006.
	It is important therefore that, where necessary, any order made under the powers given by section 80G can take effect from the start of the tax year. The Scottish rate is to apply for a tax year, and preventing amendments under section 80G from applying for the whole of the tax year could create difficulties for individuals and businesses alike. It is also identical to the power already in section 79 of the 1998 Act introduced for the Scottish variable rate.

David Gauke: The Scottish Parliament has made it clear that it supports the proposals. We are setting them out some years in advance. My understanding is that there is a consensus on the proposals, and it is for the Scottish Government to ensure that there is no gap after 2015. We have made it clear that we will work closely with the Scottish Government as we move towards full implementation of the measures set out in the Bill. This engagement will ensure that the Scottish Government can keep the Scottish Parliament apprised of implementation work in good time. I consider the additional requirements to be unnecessary, and I therefore urge the hon. Member for Dundee East to withdraw the amendments.
	I shall deal briefly with Government amendments 61 to 66, and new clause 18. These are minor and technical and ensure that we have a proper parliamentary process attached to the provisions that bring into effect the provisions of the Bill. Government amendments 61 to 64 amend the existing provisions in the Bill to bring into effect the provisions in clauses 26, 29 and 31. The amendments make it explicit that the days or tax years appointed by the Treasury under these clauses will be appointed in orders made by the Treasury. New clause 18 ensures that these Treasury orders are classed as statutory instruments and are therefore printed and published.
	Government amendments 65 and 66 both amend the existing provisions in clause 38 relating to commencement. These should be read in conjunction with new clause 18, which ensures that the order-making powers provided for by the Bill are all statutory instruments and therefore subject to the applicable parliamentary process. The amendments do not have any substantial effect on the provisions in the Bill, and are simply drafting amendments. I commend them to the Committee.
	A number of hon. Members asked about the definition of a Scottish taxpayer. Let me say at the outset that the Bill sets out a definition of Scottish taxpayers, as opposed to Scottish residents, and can therefore apply, notwithstanding the absence of a statutory residence test. It might be help if I set out how that will work. The definition of a Scottish taxpayer will determine which individuals are liable to pay income tax at the rate set by the Scottish Parliament. It is based on the definition included in the Scotland Act 1998 for introducing legislation on the Scottish variable rate, a point made by my hon. Friend the Member for Carlisle (John Stevenson). However, we have taken the opportunity to review the definition to make it easier to administer and simpler to apply, and to remove some of the potential unfairness that could arise from the application of the definition provided for the purposes of the Scottish variable rate.
	Following the recommendation of the Scottish Parliament Committee that examined the Bill, which was endorsed by the Scottish Parliament on 10 March, we also intend to table a new clause on Report to apply the new definition of a Scottish taxpayer for the purposes of the Scottish variable rate. The new definition is structured as a series of conditions that will enable an individual to see whether they are a Scottish taxpayer. Where they meet any one of these conditions, they can simply disregard the remainder. As I will explain in a moment, this means that relatively few people will need to consider every condition. In other words, the definition will produce an answer in only a few steps, avoiding the need for the majority of people to record and count the number of days spent in Scotland.
	A Scottish taxpayer will be someone who meets two tests in a tax year. The first test is that the individual in question is UK resident for tax purposes. It is important to emphasise that the definition does not disturb those rules or increase their complexity, but merely sits on top of them. We are not replacing the underlying rules of UK tax residence with an entirely new concept of Scottish tax residence. The second test is whether the individual meets any one of three conditions—A, B or C.
	Condition A is that the individual has a “close connection” with Scotland, which is defined in proposed new section 80E. For the majority of people, it will be a straightforward question of whether they have a close connection with Scotland. If they have one place of residence in the UK and it is in Scotland, they will have a close connection with Scotland and will therefore be a Scottish taxpayer, provided that they live there for at least part of the year. This last condition—that the individual lives in the place of residence—is a crucial part of the definition and ensures that it is simple to operate. Someone may stay in a place of residence which is not their home, perhaps while on holiday or as part of their work, but such nights away are disregarded because those are not places where the person lives, but merely places where they stay.
	Let us consider the example of sales reps who have one home in England in which they live with their family at weekends, but who spend their working week in Scotland. While they are away, they stay in a variety of hotels. Because the family home in England is the only place in which they live, they will not have a close connection with Scotland and will therefore not be a Scottish taxpayer, even though they physically spend more nights in Scotland than they do in England. That is all they need to do; there is no requirement for them to keep a detailed record of the number of nights they spend in each part of the UK. This is one way in which we have sought to improve on the definition of a Scottish taxpayer set out in the 1998 Act, which would have required people in such a position to keep records of the days they spend in each part of the UK.

David Gauke: I will come to condition C in a moment, which I hope will provide the hon. Gentleman with the answer that he and others are looking for.
	Having dealt with condition A, it would remiss of me not to address condition B. It is possible for some people with two or more places of residence in the UK to be unable decide which is their main place of residence. I do not think that that applies to Mr Stewart senior, but it might apply in some cases. It is for such people that condition B has been designed. Someone who cannot determine under condition A which part of the UK they have a close connection with will need to count the number of days they spend in Scotland, compared with the number of days they spend elsewhere
	in the UK—in other words, a straightforward day count test. If they spend more days in Scotland than they do elsewhere in the UK, they will be a Scottish taxpayer. If they spend more days elsewhere in the UK than they do in Scotland, they will not be a Scottish taxpayer. We recognise that it might be onerous in some cases to have to keep a day count record, but the number of people within that category should be relatively few.
	To deal with one question that my hon. Friend the Member for Milton Keynes South (Iain Stewart) raised, for the purposes of the day count, an individual has spent a day in Scotland or in any part of the UK when they are present at the end of the day—in other words, at the stroke of midnight. That is consistent with the existing and long-standing rules that determine presence in the UK for the purposes of tax residence.
	Condition C, which I suspect is of particular interest to a number of hon. Members, is set out in proposed new section 80D of the 1998 Act and is very straightforward. If someone represents a Scottish constituency in the Scottish, UK or European Parliaments for any part of the year, they will be a Scottish taxpayer for that tax year, provided of course they are UK resident, which I assume will generally be the case. The definition has also been designed in such a way that an individual will be a Scottish taxpayer for a full year. They cannot be a Scottish taxpayer for part of the year and not a Scottish taxpayer for the rest of the year. That again helps to reduce unnecessary complexity in applying the definition and understanding of whether or not an individual is a Scottish taxpayer.
	It is envisaged that the new Scottish rate of income tax will first be applied from 6 April 2016, as we have already heard. There are more than five years before the provisions take effect, and during that time we will continue to discuss with businesses, employers, taxpayer representatives, charities and software providers the necessary practical steps to achieve a successful implementation. The measure will need to work successfully throughout the UK tax system, as it will not impact on Scottish taxpayers or on Scottish employers alone.
	HMRC has therefore established three technical groups with representatives throughout the UK, including a pensions group, charities group and an income tax group. Those groups are reporting to the high-level implementation group, which the Secretary of State and I established last summer. We are discussing with the technical groups the implementation issues—for example, the application of differing rates throughout the UK on tax relief for contributions to pension schemes and on gift aid. It is also conceivable, given the lead time to implementation, that there might be changes in the business or tax environment or to processes.
	As we discussed when considering the earlier amendments, the clause includes a number of supplementary powers to allow certain modifications to be made at a later date—for example, enabling certain types of income or relief to be included or excluded from the Scottish rate to provide the flexibility to respond to stakeholder input and to the changing environment.
	I shall pick up on some of the questions that I have not dealt with in my explanation, which I hope the Committee has found helpful. A worker who spends significant amounts of time on an offshore oil rig or another place of work off the UK coastline will not usually need to count the number of days they spend
	there to determine whether they are a Scottish taxpayer. The oil rig is not likely to be their sole or main place of residence in the UK, so any time spent on it can be disregarded when deciding whether they are a Scottish taxpayer. The only exception is if the location of the individual’s main place of residence is genuinely unclear. In such cases, whether someone is a Scottish taxpayer will be determined by the day count. If the oil rig is in Scotland, those days will need to be included for the Scottish count.
	We continue to look, with the Ministry of Defence, at the issues surrounding our armed services, and we will come to a firm conclusion on that in the near future.
	The question was raised of whether a personal representative of a deceased person will be a Scottish taxpayer, and the answer is no. A Scottish taxpayer will be an individual, and after their death that will not extend to the personal representative. It follows that any income arising during the administration of the deceased’s estate will not be subject to the Scottish rate of income tax.
	I was asked whether it was fair that people will not receive split-year treatment when they move between Scotland and the rest of the UK, and I touched on that briefly a moment ago. No split-year treatment applies to those leaving or arriving in Scotland: an individual will be a Scottish taxpayer for a full tax year or not at all. There is no prospect of double taxation when someone lives part of the year in Scotland and the rest of the time in another part of the UK. It would be administratively much more complex were we to try to split the year.
	On whether proposed new section 80G is too broad, that goes back to my earlier discussion of the amendments in this group. The power in the new section is needed to deal with mainly technical changes and to decide which reliefs should be taxed at the variable or UK rates. That is almost a mirror image of the power to deal with the consequences of setting the Scottish variable rate, which is already in section 79 of the 1998 Act. It is worth pointing out, as I said earlier, that we have set up three technical committees, on charities, pensions and income tax, to discuss the impact that the Scottish rate of income tax will have on the wider tax system, and to consider where modifications might be required. Therefore, we need the power to deal with that situation.
	I reassure the Committee that the Treasury does not seek a general power to impose retrospective legislation; the measure set out in proposed new section 80G is limited to the start of the tax year. If we need to make a consequential change, we will ensure it takes effect at the same time as the provision to which it is consequential. We think that that will be helpful.
	A point was made about what HMRC and the Government will do to support employers, and about the concern that the measure might be administratively difficult for employers when identifying who is and is not a Scottish taxpayer. Let me assure the Committee that it will be HMRC’s responsibility to identify who is and is not a Scottish taxpayer. Scottish taxpayers will then be given a Scottish tax code by HMRC, and employers will use it in the PAYE system, just as they do with other employees. It is also worth mentioning that there will be an awareness campaign in Scotland and in the rest of the UK ahead of the system’s introduction.
	The rights of appeal will be based on existing mechanisms, but they might need to be adapted, and HMRC will discuss that with the professional associations in due course through the technical groups that it has established. The self-assessment form for the self-employed will need to be altered to reflect the existence of Scottish taxpayers.
	On condition C, which applies to Members of Parliament and of other elected bodies, the question was asked, “Why not Scottish judges, other senior members of the Scottish civil service and so on?” We have singled out only elected representatives; others will be subject to the same rules as other Scottish taxpayers. We think it appropriate that there is no ambiguity in the case of elected representatives, and those representing Scottish constituencies at whatever level should be Scottish taxpayers.
	That is a rather lengthier speech than I had hoped to make, but a number of questions were raised and I wanted to provide as many answers as possible to what is one of the most technically challenging aspects of the Bill. The solutions that we have reached are those that improve what we are building on, and they should provide as much clarity as possible.

Amendment made: 61, page20,line31,after ‘Treasury’, insert ‘by order’.—(Mr Gauke.)
	Amendment proposed: 42, page20,line31,after ‘Treasury’, insert
	‘, with the consent of the Scottish Parliament,’.—(Stewart Hosie.)
	Question put, That the amendment be made.
	The Committee divided: Ayes 9, Noes 286.

David Gauke: Clause 30 provides for the devolved tax on the disposal of waste to landfill sites in Scotland. One Calman Commission recommendation on tax was to devolve landfill tax, which was endorsed by the Scottish Parliament when it voted its consent on 10 March.
	The tax will be a devolved tax for the purposes of part 4A of the Scotland Act 1998, which is introduced by clause 24. That means that the Scottish Government and Parliament will have complete control over the design and administration of the Scottish landfill tax, allowing them to complement their wider waste policies and to legislate to introduce a devolved tax to replace the existing UK landfill tax in Scotland. I hope that answers the main questions asked by the hon. Member for Edinburgh North and Leith (Mark Lazarowicz).
	The revenue raised by the tax will remain in Scotland for use by the Scottish Government. Clause 30 provides as blank a canvas as possible for the Scottish Government to design their tax by simply providing the power to introduce a tax on material disposed of as waste to landfill sites in Scotland. It will come into effect when the Bill receives Royal Assent, which will allow the Scottish Parliament to legislate for the devolved tax, and for the Scottish Government to make the necessary administrative arrangements. The clause, however, provides that the devolved tax cannot apply to disposals made before the date on which the existing UK landfill tax is disapplied in Scotland, as provided in clause 31.
	To answer the question on landfill tax competition, the Government are fully devolving that matter. Those setting the structure and rates of landfill tax in Scotland will clearly want to take into account the factors that were raised, such is the nature of devolution in such areas.
	Question put and agreed to.
	Clause 30 accordingly ordered to stand part of the Bill.

Stewart Hosie: I beg to move amendment 51, in page24,line20,leave out from ‘which’ to end of line 22 and insert—
	‘are required by them to meet current expenditure because of a shortfall in receipts from the Scottish rate of income tax or devolved taxes.’.

Dawn Primarolo: With this it will be convenient to discuss the following:
	Amendment 52, in page24,line22,at end insert—
	‘(1ZA) In borrowing sums under subsection (1), the Scottish Ministers must have regard to any code of practice agreed by them and the Treasury.
	(1ZB) A code of practice agreed under subsection (1ZA) may include provision as to—
	(a) how the Scottish Ministers are to determine and keep under review how much they can afford to borrow,
	(b) the terms and conditions on which sums may be borrowed,
	(c) limits on the aggregate at any time outstanding in respect of the principal of sums borrowed.’.
	Amendment 54, line23,leave out from ‘may’ to ‘any’ in line 24 and insert ‘borrow’.
	Amendment 55, line28,at end insert—
	‘(1C) In borrowing any sums under subsection (1A), the Scottish Ministers must have regard to any code of practice agreed by them and the Treasury.
	(1D) A code of practive agreed under subsection (1C) may include provision as to—
	(a) how the Scottish Ministers are to determine and keep under review how much they can afford to borrow,
	(b) the terms and conditions on which sums may be borrowed,
	(c) limits on the aggregate at any time outstanding in respect of the principal of sums borrowed.’.
	Amendment 53, line31,leave out subsections (6) to (8) and insert—
	‘(5A) Subsections (2) and (3) are omitted.’.
	Amendment 56, leave out line 38 to line 5 on page 25.
	Amendment 57, page25,leave out subsection (10).
	Clause 32 stand part.

Stewart Hosie: The borrowing powers in the Bill are at the heart of devolution. On Second Reading, a number of serious questions were raised on both revenue and capital borrowing powers. I shall come to the detailed issues in the main part of my comments, but, fundamentally, I am seeking to put in place a code of practice for the Treasury and the Scottish Government to address limits, restrictions, thresholds, maximum amounts and the nature of borrowing, be it through bonds or direct loans from the consolidated fund. That is a sensible way to amend the Bill. To make such provisions otherwise would require draft orders to be tabled, but amendments to Bills cannot be made with draft orders. Much of the narrative on this matter is in the Command Paper, but it is likewise impossible to amend by amending the Bill.
	The amendments are pretty self-explanatory but I would like to detail the reasons for them. The revenue-borrowing powers are fundamentally linked to the wider taxation proposals in the Bill. Both the Scottish National party and the Scottish Government have previously made clear their concerns about the tax proposals. If a full range of fiscal policy levers were available to the Scottish Government, it would have to include a borrowing regime with sufficient flexibility to allow public spending profiles to be managed across entire economic cycles, not simply four-year forecast periods. The UK Government’s proposals, however, fall far short of that, yet by exposing the Scottish Government and the Scottish Parliament to cyclical fluctuations in income tax they embed a high degree of volatility in Scotland’s public finances, which cannot be right when we are seeking to protect public services and find means to grow the economy.
	The Bill proposes to allow for annual borrowing of up to £200 million in any one year, and for a maximum limit of £500 million to finance current expenditure where there are differences between forecasts and the outturns of Scottish tax revenue under the Bill’s income tax proposals. Loans must be made within four years of being taken out. I understand that these provisions are additional to the provisions of the Scotland Act 1998, which allows revenue borrowing for the purposes of providing cash balances and maintaining cash flow. The aggregate limit of the Act is also £500 million, so the additional purpose proposed in the Bill, plus the passage of the 13 years since the original limit was set, has apparently not been considered sufficient reason for lifting the limit. We do not believe that that is credible.
	The Bill also lacks flexibility to deal not necessarily with forecast errors, but forecast falls identified in advance. I will return later to the reason that is a problem. More crucially, the provisions in the Bill are insufficient to manage volatility in tax receipts that might reasonably be expected to occur. Importantly, over the past decade, UK Government income tax forecasts have, on average, been overly optimistic, and the annual cap of £200 million would have been insufficient to offset deviations in income tax receipts relative to forecasts in recent years.

Stewart Hosie: I thought that my remarks were always understandable. The problem is that we are dealing with the technical provisions—the fiscal and borrowing powers—of a Bill. It is necessarily technical. However, I shall try to summarise it in plain English, if possible, when I get towards the end of my remarks.
	In 2010-11, the difference between the Treasury’s original forecast for UK income tax and the most recent estimate is about £35 billion. Under the Scotland Bill, an equivalent forecasting error would have reduced the Scottish Government’s budget by approximately £1 billion. The implication of that and the four-year payback period is that had the system been in place during the last spending review period, repayment of the loan would have had to be made within what are now pressurised budgets—a £1.3 billion cut to Scotland this year, and over £3 billion in the comprehensive spending review—between now and 2014.
	In contrast, the UK Government can spread the repayment of cyclical borrowing over a significantly longer period to ensure that it does not adversely impact on the resources available for public services. That is important, because it is accepted in all parts of the House that in times of recession or downturn, tax revenue falls and borrowing goes up—that is an automatic stabiliser—but the same implicit provision has not been made in the Bill. That is a flaw that I know is now recognised by people in many parties.
	The inadequacy of the borrowing powers for this purpose was highlighted in the written evidence to the Scottish Affairs Committee from Professor Andrew Hughes Hallett and Professor Drew Scott. They said:
	“Over the decade before the current recession, 1997-2007, the UK governments track record for income tax receipts is one of forecast errors that range between +7% to -4%, with an average of +1.1%”
	a year. They continued:
	“Since borrowing will follow from overestimates”—
	the real amount will be less than the forecast—
	“this means the Scottish Government will need to cut spending or borrow every year on average and should expect to exhaust its borrowing limit several times in a decade.”
	To have such a flaw built into a Bill from the outset is profoundly unhelpful to the efforts of the Scottish Government to protect public services and grow the economy. The proposals also lack any ability to smooth the effects of cyclical downturns.
	Unlike the UK Government, the Scottish Government will have no opportunity to use borrowing to compensate for a forecast decline in income tax revenues in the event of, for example, an anticipated slowdown in the global economy. Scotland would have no option but to cut spending to match the reduction in revenue at precisely the time when we might want to invoke an economic stimulus—a policy of the previous Government that we supported. However, it would be impossible to do that, because cuts would be required to match a forecast fall in revenue.
	The Bill misses the fundamental point about being able to respond effectively to the natural volatility of tax revenues in managing public expenditure. Paradoxically, the more accurate the Office for Budget Responsibility is at forecasting falls in future revenue, the greater the volatility in the budget, because borrowing is permitted not against a forecast fall but only against a discrepancy between the forecast and the actual level. That is a huge problem with the borrowing powers at the heart of the Bill. If the Exchequer Secretary or his Scotland Office colleague wants to indicate that they intend to table the necessary amendments on Report or later to rectify that, I would be happy for them to intervene at any point.
	The need for appropriate borrowing powers for that purpose was identified by Professor Michael Keating, who said:
	“Borrowing powers are needed for three purposes: to deal with short-term shortfalls, which the present proposals provide for; to deal with cyclical downturns; and for capital investment. There should be more scope for borrowing to deal with cyclical downturns.”
	That point was also highlighted in the written evidence provided by Professors Hughes Hallett and Scott, who said:
	“The current recession, for example, would according to calculations on the Scotland Office website have cut the Scottish budget by £748 million and £559 million in 2008 and 2009 respectively, sums that are beyond the entire borrowing ceiling—let alone the annual limit of £200 million. But no borrowing would be allowed in such cases anyway. Or, to put the point another way, given that there is a cycle and that adverse shocks do occur, the more accurate the tax forecasts the more volatile will Scottish revenues become and the more the Scottish government will be obliged to cut spending and social support in a downturn”—
	precisely the wrong time for cuts to have to be made.
	“This is why we say the Bill’s borrowing provisions offer only limited protection against forecast errors and none at all against unexpected economic shocks.”
	Clause 32 amends section 66 of the Scotland Act, which deals with the borrowing powers of Scottish Ministers. Proposed new section 66(1)(c) of the 1998 Act specifies that revenue borrowing will be permitted when tax receipts fall short of the forecast, but contains no provision to permit it to deal with cyclical fluctuations in tax receipts, regardless of whether they are accurately forecast. That obvious gap in the Bill must be addressed. On Second Reading I raised the issue of revenue borrowing powers being further constrained because the first 0.5% of any shortfall—about £127 million forecast in 2014-15, say—would have to be found from cuts before any revenue borrowing could even take place if there was a forecast error. Again, cutting at that point, when budgets
	would already be pressurised because of the cuts from the comprehensive spending review, would be the wrong thing to do.
	I was pleased with a number of the recommendations made by the Scottish Parliament Committee, which said among other things that
	“the Scottish budget should not be required to meet the cost if tax receipts fall below forecast levels. The Committee recommends that this condition be removed from the Bill.”
	The Committee also recommended that
	“the short-term annual borrowing limit should be increased from £500 million to around £1 billion,”
	and welcomed
	“the idea of a Scottish Cash Reserve, but proposes going further to ensure that this includes all Scottish End Year Flexibility saved in Scotland without the need for Treasury agreement, so in future Scottish ministers”—
	of whatever party or Government—
	“will have total discretion over the Scottish budget.”
	That should be universally welcomed. I welcome those recommendations, and I hope that the Government will table amendments to reflect them. However, it would be so much better to ensure a code within which revenue borrowing—including repayment time scales and so on—could be organised. That is the fundamental purpose of the amendment, along with ensuring that borrowing for current revenue purposes is sufficiently flexible to cope with fluctuations in revenue over a whole economic cycle.
	The Bill as drafted has a number of weaknesses when it comes to capital borrowing. Our key concerns, and those of the Scottish Government, relate to the timing of the introduction of the repayment terms, the limits set by the Bill and the limitations on sources of borrowing, which the Scottish Parliament Committee recognised and made a positive recommendation about.
	The command paper that accompanies the Bill, “Strengthening Scotland’s Future”, sets out in limited detail how the proposals are intended to work. Borrowing is to be available for specific projects, subject to Treasury consent, from 2013, and we discussed that on Second Reading. From 2015, a capital borrowing of 10% of Scotland’s capital departmental expenditure limit, around £230 million a year, up to a cumulative total of £2.2 billion, will be available. To put that into context, the Scottish Government could use up the entire cumulative limit by, for example, paying for the Forth bridge replacement crossing. If my memory serves me correctly, that cumulative amount of about £2.2 billion is less in capital terms than the Scottish Government have been spending in any of the past few years.

Ann McKechin: I welcome the clauses relating to borrowing powers. We agree that they make sense in terms of both short-term revenue and capital.
	In paragraph 597 of its report, the Holyrood Committee accepted that
	“Given its responsibility for macroeconomic management”,
	the United Kingdom Government
	“has a proper interest in the flow of borrowing”.
	We agree with that. However, there is a worthwhile discussion in the report about evidence from the Government and other experts relating to the overall level of borrowing, both short-term and on the capital account, and we think that the Government should consider the Committee’s arguments. It did not identify an alternative figure, but made some suggestions that we think worthy of consideration. I ask the Government to confirm that they will examine the report in detail, and will take the earliest opportunity to present their assessment to the House of Commons or the House of Lords. I note that the Scottish Government will be able to borrow from commercial lenders as well as from the National Loans Fund, and I welcome that as well.
	The hon. Member for Dundee East (Stewart Hosie) should be careful. I assume that his are primarily probing amendments, and I think it right to test some of the issues discussed in the Holyrood Committee, but as well as looking for the benefits, he must accept the responsibilities of the Scottish Government in terms of overall public sector borrowing limits. Although we may disagree with the Government on what those limits should be and on the scale of the deficit reduction, we accept that as an important criterion in the debate.

Ann McKechin: That marks a first. I cannot recall the Scottish Government asking for less money. I seem to remember that when Labour was in government, they kept asking for more money and saying that they did not have enough.
	The hon. Gentleman made a comment about the deficit. Before 2007 it was about 2%, which was perfectly manageable within the fiscal settlement. The increase in the deficit was primarily caused by the banking crisis, which was an international crisis as the hon. Gentleman accepts, and by the fact that we stimulated the economy, which he also accepts, although he said we should have stimulated it even more. He cannot have his Dundee cake and eat it, however. He either accepts one interpretation of what happened, or he accepts the interpretation of the coalition Government, which we believe to be false.
	The hon. Gentleman raised a number of queries about the Holyrood Committee recommendations, particularly in respect of the requirement that the first £120 million of any tax shortfall must be met by spending reductions in the year in question. It would be helpful if the Minister could explain the rationale for imposing
	that. I think that measure is in the Command Paper—it is not in the Bill itself, of course. This issue is of particular concern in the light of the Government’s decision to abolish the end-of-year flexibility scheme at very short notice this year, which will cost the Scottish budget an estimated £23 million.
	When the Minister gave evidence to the LCM Committee, he drew a distinction in respect of end-of-year finance arrangements, but at no point did he intimate that the Government or Chief Secretary to the Treasury had decided that they would be gobbling up the £23 million as part of the deficit reduction plan. That raises concerns about the nature of the relationship between the UK Government and the Scottish Government in terms of the so-called respect agenda. Will the Minister confirm at what point this issue was raised with the Joint Ministerial Committee and the Scottish Government? Why was no mention made of this when he and the Chief Secretary were giving evidence to the LCM Committee? Again, this is about the issue of trust and the maintaining of good governmental relationships. As I have mentioned before, it is key that that is maintained to the highest degree in respect of these clauses.
	There have been issues to do with the Government’s criterion of setting a limit of £2.2 billion for capital expenditure. There are some very good suggestions in the Committee’s report about increasing borrowing capacity, which we think are worthy of consideration.
	Finally, as the Minister will be aware, my colleagues in the Scottish Parliament have called for the borrowing powers to be brought forward from the proposed implementation date of April 2013 to April 2012. Given that we anticipate that this legislation will be on the statute book by the end of this year and before the next financial year, I can see no good reason why the power cannot be advanced to April 2012, which, as the Minister will be aware, is within the current comprehensive spending review period. That would assist the Scottish Government —of whatever political hue—in making appropriate planning decisions after the election. If the Minister could give an early indication that the Government are minded to bring forward the introduction of this power to 2012, that would be widely welcomed. I therefore hope he can give the Committee one positive piece of news tonight.

David Gauke: I propose to deal with amendments 51 to 57 first, and I recognise that, as has been said, they partly overlap with the report from the Scotland Bill Committee in the Scottish Parliament. As my right hon. Friend the Secretary of State for Scotland set out last week, the UK Government will consider the recommendations in the Committee’s report thoroughly, alongside an assessment of the impact on the UK fiscal position.
	The purpose of amendment 51 is twofold. First, it would remove the requirement for Scottish Ministers to access revenue borrowing to meet current expenditure only in accordance with rules determined by the Treasury. Secondly, it would allow such borrowing to be accessed due to a shortfall in outturn receipts against forecast receipts from devolved taxes and the Scottish rate of income tax. I will deal with each of those in turn.
	On the need for borrowing by Scottish Ministers to comply with rules determined by the Treasury, I note that the report from the Scotland Bill Committee in the Scottish Parliament—where the Scottish Government voted with the motion—recognised the need for the UK Government to constrain the borrowing powers. I am delighted that there appears to be a consensus in the House that nobody wants to do anything silly with the public finances, as one could have been forgiven for thinking that that has not been the case over recent years.
	There are important reasons for Scottish Ministers to comply with Treasury rules on borrowing. The Bill’s new borrowing powers will sit within the UK fiscal framework as a whole; interest on Scottish borrowing will be included in the total UK public sector borrowing aggregates. As overall macro-economic policy will continue to be a reserved matter, it is necessary for the UK Government to set controls and limits on the borrowing powers in order to retain overall control of UK borrowing, protect overall economic stability and minimise fiscal risks to the UK Exchequer. This Government believe that the specific terms and conditions set out in the Bill and the Command Paper strike the right balance between protecting overall levels of UK debt and increasing the financial accountability of the Scottish Parliament.
	On the second point, I wish to thank hon. Members for bringing an important discrepancy to the attention of the Committee. Although the Command Paper was clear that revenue borrowing would be used to meet current expenditure because of a shortfall in receipts compared with forecast in devolved taxes and the Scottish rate of income tax, the Bill was not so clear. The Government will therefore introduce their own minor and technical amendment on Report to include the Scottish rate of income tax alongside devolved taxes. In conclusion, given the continued control by the Government over the UK fiscal mandate and the fact the Government will be introducing their own amendment in respect of the second issue, I ask the hon. Member for Dundee East (Stewart Hosie) to withdraw the amendment.

David Gauke: The point of the amendments that will be introduced on Report is to do exactly as I have described. May I make a point about the cyclical impact and the adequacy of current borrowing? In the past downturn, income tax receipts fell by about 6% or 7%, so we are looking at a variation of 6% or 7% of the £4.5 billion estimated Scottish income tax receipts. That is about 1% of the Scottish budget, because it needs to be seen against the continuing bedrock of stability afforded by the block grant. I make that point so that we can place this issue in context.
	Amendments 53 and 66 would have the effect of removing the borrowing limits. They do not replace the limit with an alternative figure, as has been made clear
	following a number of interventions from hon. Members, so I have assumed that the intention is for these limits to be determined by a new “code of practice”, as set out by the hon. Member for Dundee East (Stewart Hosie) and put forward in amendments 52 and 55. There are important reasons why the Bill contains limits, which I have already set out and which include the fact that Scottish borrowing would have an impact on the UK borrowing figures. It is surely right that the limit should be determined by the House, first through its consideration of the Bill and subsequently through approval of any order altering the limit. UK Government analysis continues to suggest that the limits in the Bill for revenue borrowing, together with the Scottish budget absorbing the first 0.5% of the deviation between forecast and outturn receipts, are sufficient in normal conditions.
	Crucially, the Bill allows borrowing to increase above £500 million but not below, so it is a base. Any such changes would require the approval of the House, but the Government are prepared to look at the specific circumstances in future. There might well be circumstances in which greater flexibility would be appropriate. The capital borrowing limits have been set at £2.2 billion and the Government believe that that represents an acceptable level of borrowing for the UK finances. That figure is based on a 10% annual capital departmental expenditure limit of Scotland’s capital budget—equivalent to £230 million in 2014-15—over a 10-year repayment period. Again, the Bill provides for the limit to be increased above, but not reduced below, £2.2 billion. Any such changes would require the approval of the House.
	Amendments 55 and 52 would introduce a new code of practice between the Treasury and Scottish Ministers governing capital borrowing and placing it on a statutory footing. The full code has not been set out but it might include provisions on how Scottish Ministers should determine and review what they can afford to borrow and the terms and conditions on which sums can be borrowed, including borrowing limits. For reasons I have set out, it is right that borrowing limits and the terms and conditions around borrowing should be determined by the House—first through its consideration of the Bill and subsequently through its approval of any order altering the limit.
	Amendment 54 would remove both the role of the Treasury in approving capital borrowing and the restriction that such borrowing must be by way of a loan. Let me be clear about the scope of Treasury approval in capital borrowing by Scottish Ministers. If Scottish Ministers wanted to borrow before their full power came into effect, that would impact on the UK’s borrowing requirement as set out by the Chancellor in the spending review. The Command Paper therefore sets out a pragmatic way to manage the risks from maximising opportunities for stimulating economic growth in Scotland while retaining control of the overall UK fiscal mandate. Scottish Ministers will need to seek the consent of the Treasury to borrow early, between 2013 and 2015, in a way that does not impact on the fiscal position or alter the plans set out in the 2010 spending review—for example, to make prepayments to fund the construction of the Forth bridge.
	The rationale for restricting Scottish Ministers’ borrowing for capital expenditure by way of loans is simple. Scottish borrowing through bonds would be classified as UK
	borrowing and, as borrowing through bonds is likely to be more expensive than raising finance through UK gilts, those higher costs would be reflected in increased UK debt interest payments, which would ultimately result in higher costs for the UK. In these uncertain times we cannot afford the risk of extending the power to issue bonds. The hon. Member for Dundee East quoted Professor Holtham, but, because of the likely greater cost of bonds, the professor also made the point that the issuing of bonds by the Scottish Government would essentially be a vanity project. These matters need to be considered in that context.

David Gauke: I note the hon. Lady’s comments. We are looking carefully at the recommendations by the Committee in the Scottish Parliament. We note her representations, and we will respond in due course. I wish to underline the fact that it is of absolute importance that we manage to maintain credibility, which is perhaps why there is less flexibility now than there may be in future. The
	hon. Member for Glasgow South West (Mr Davidson) suggested that there might be greater flexibility in future, but we would need to assess that nearer the time. However, I note the hon. Lady’s remarks on the transitional period for borrowing.
	Amendment 57 is consequential on amendment 56. As hon. Members wish to remove the borrowing limits from the Bill and the ability to revise those limits with the approval of the House, clause 32 (10) would no longer by necessary as there would be no such secondary legislation. The hon. Member for Glasgow North (Ann McKechin) raised the issue of end-of-year funds across all the devolved Administrations and Departments amounting to some £20 billion. Such large sums of accrued EYF present a fiscal risk to the UK Government, which is why new arrangements will be detailed in the forthcoming Budget. I hope that that clarification is helpful.
	I thank the hon. Members for the opportunity to set out the Governments position on the important borrowing powers provided by the Bill. This has been a helpful and perhaps probing debate—we shall see. However, we do not accept any of the amendments, so I invite the hon. Member for Dundee East to withdraw amendment 51. For the reasons that I have set out, I hope that hon. Members agree that that clause 32 should stand part of the Bill.

Question put, That the amendment be made:
	The Committee divided: Ayes 7, Noes 393.

Brian H Donohoe: New clauses 1 and 2 relate to regional Members of the Scottish Parliament, which were introduced in an irksome move and have been with us for a long time—since the outset of the Scottish Parliament.

Angus MacNeil: I am grateful that the hon. Gentleman mentions list MSPs. In the Highlands, we know that Rob Gibson and David Thompson are the SNP list MSPs, but I have no idea whatever who the Labour MSPs are.

Angus MacNeil: I do not know who the Highland Labour list MSPs are, so could the hon. Gentleman inform us?

Angus MacNeil: Will the hon. Gentleman tell us—
	The occupant of the Chair left the Chair (Programme Order, 27 January).
	The Deputy Speaker resumed the  Chair .
	Progress reported; Committee to sit again tomorrow.

Edward Leigh: This is an important Adjournment debate about the future of the BBC’s Hindi radio service. At the moment, it is broadcast for three hours a day, divided between the morning and the evening, and reaches no fewer than 10 million listeners, mostly in the northern Hindi-speaking regions of Uttar Pradesh, Bihar and Jharkhand. Hindi is the second-largest language audience of the BBC World Service worldwide—of course, English is the first—and it is precisely these three poorer states in India that the Department for International Development has committed to support until 2015 to the tune of £280 million.
	The BBC is cutting its shortwave Hindi service, which costs £1 million a year, but once cut, it will save just 2.5p per listener. This, I contend, is the wrong saving to make, and I very much hope that the BBC will think again. The BBC Hindi service began in May 1940, on the very same day that Churchill became Prime Minister, and it employed I. K. Gujral, who later became the 13th Prime Minister of India. The Hindi service was also the first news outlet to break the news of Indira Gandhi’s assassination.
	There has been a so-called partial reprieve—I would call it a climbdown—after the massive outcry over the total abolition of a radio service that serves 10 million people, and which most radio stations in the world would give their eye tooth to have. However, all that will do is save one hour of Hindi broadcasting for just one year, and that is not enough. The work schedules of the poorest Indians mean that they can often hear only one broadcast or the other. Many listeners want their radio news in the morning. This decision will wipe out a large proportion of the audience overnight.

Gareth Thomas: With due respect, surely the Minister knows whether or not there have been ministerial discussions, and given the strength of concern in the House, surely a Minister from the Foreign Office could talk to DFID colleagues, or, potentially, to those who run the BBC World Service, to get some clarity about possibly at least extending the one-hour service back to the three-hour service?